Option trading in USDINR

@Abid_Hassan hi abid. I am trading in USDINR options on following strategies. Need your opinion on strategies and what factors I need to keep in mind in order to successfully execute this strategies. My objective is to manage the funds and to get a 2.5 to 3 percent return a month… following strategies I do .

  1. say USD is at 65 and if monthly volatility is 1% I would short 65.75 and buy 66 . Or short 66 and buy 65.75… some times this goes wrong and I make a loss …what to take care in this. Whether to do this or not .

  2. I make iron butterfly in last 10 days of expiry. I select the strikes to short based on maximum OI concentration. Gives good money for 8 or 9 months but sometimes suddenly. Movement takes money. Though limited as both sides are packed.

  3. based on the volatility I short CE and PE simultaneously. Strikes are select d based on volatility. But this works when the markets are sideways. If USD starts moving in a particular direction . Strategy start making loss.

Please guide how to batter the above trades in order to keep myself right 80% of the time. Any strategies you would like to suggest academically. I would do the research on that.



@Abid_Hassan hi abid, would be great if you can spend some time.

Hey @mparmar

Sorry about the delayed reply.

  1. Your options are a call spread short versus a call spread long. Inherently you have a directional bias here which is towards top side. If you think direction is USDINR up, then 65.75 long 66 short may fare better and vice versa. To be truly vol playing I would rather say butterfly or condor is better

  2. Not sure if exchange OI means anything at all. USDINR is an interbank market. Exchange is a sideshow. I am not sure how well the OI play based on exchange volumes will work. And interbank volumes are 1) OTC so not accessible. 2) Scattered across India and overseas, though mainly India

  1. So here is a small catch, When you trade options, if you always delta hedge perfectly, then you can be short vol, market can trend, and still you can make money!

I have had an incident when I was short 50 Call in 2011 massively, and market went to 54, and yet I ended up green. Here is how it works.

Short a straddle/ strangle. Keep it delta neutral. When market moves in a direction, recalculate delta. If it went up, you buy USDINR FUT, and if it went down you sell USD INR FUT to stay delta neutral.

So if market keeps going up, you will keep buying USDINR FUT in small quantities. Your losses in options will be neautralized by the gains in future. The reverse that is SELL USDINR for trending down.

Of course the worst thing for you here is that the market keeps moving up and down, you buy futures high, sell them low and lose money. Also, when there are gaps, you will not be able to buy or sell the futures at good prices, and that is bad.

What is actually happening here goes to the definition of volatility. When market trend one way, vol is low (!!!). WHen market move up and down, vols are high. When gaps happen, vols are high. I would ask you to figure out why this is the case yourself, because that will be an essay :slight_smile:

In options traders lingo, when you perfectly delta hedge - “You make money when the realized volatility is lower than implied volatility and vice versa.” Again, google searching with these keywords will give you detailed academic papers.

Hope this helps!


This sounds really helpful. I need Greeks calculations in kite. Like portfolio Delta . Any idea how I will get. Or any future developments are in pipeline.

BTW thanks for a very useful info.

Appreciate [email protected]_hassan and team zerodha efforts towards creating trader friendly platform.

Hi @mparmar
Zerodha has this:

You can add up individual Greeks to get the sum Greeks. As long as you do not have too many positions, an excel sheet plus this will do

And Sensibull will come soon with portfolio delta :slight_smile:

Great. Eagerly waiting.

Ok. So can we do like. "When IVs are low we can buy butterflies and aquareoff when IVs increase. And vice versa

Hi, can you please inform where can I get current RBI ref. rate. On RBI website they stopped publishing it in Jul 2018 because they handed over this job to FBIL. On FBIL site they are showing reference rate with 1 week lag. Like on 21 May 2021 evening, they were showing ref. rate of 14 May 2021 and so on. We as traders need ref. rate of same day or at least of the previous working day. As we know USDINR weekly options expiry settlement price is = RBI ref. rate at 12:30 every Friday. Hence this info is useful for a trader. Thanks

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I am also interested in knowing this.

Only recently came across FBIL’s Press Release dated March 11, 2021 which mentions that Reference Rate will now be available for public viewing after a lag of 7 days instead of the earlier 24 hours lag.